* Canadian dollar gains 0.5% against the greenback
* Bank of Canada holds benchmark interest rate at 0.25%
* Canadian manufacturing sales rise 10.7% in May
* Canada-U.S. 10-year spread widens by 1.7 basis points
By Fergal Smith
TORONTO, July 15 (Reuters) - The Canadian dollar rose against the greenback on Wednesday as investors grew more optimistic about a COVID-19 vaccine and after the Bank of Canada reinforced its commitment to support economic recovery.
Canada's economic growth will not return to pre-pandemic levels until 2022, the Bank of Canada said, in an outlook that was cautious on U.S. growth. It left its benchmark interest rate at 0.25%, a level it considers to be the floor, and said it would remain at that level until economic slack is absorbed. BoC remains all-in in terms of its commitment to stimulus in order to support the recovery of the economy," said Ryan Brecht, a senior economist at Action Economics.
World shares .WORLD climbed toward a four-month high after U.S. researchers reported that Moderna Inc's MRNA.O experimental vaccine for COVID-19 showed it was safe in an ongoing early-stage study. runs a current account deficit and is a major exporter of commodities, including oil, so the loonie tends to be sensitive to the global flow of trade and capital.
U.S. crude CLc1 prices were up 1% at $40.70 a barrel after a sharp drop in U.S. crude inventories. Canadian dollar CAD= was trading 0.5% higher at 1.3546 to the greenback, or 73.82 U.S. cents. The currency, which on Tuesday touched its weakest intraday level since June 30 at 1.3646, traded in a range of 1.3543 to 1.3617.
Canadian factory sales jumped by a record 10.7% in May from April as many manufacturers resumed operations following partial shutdowns related to the coronavirus outbreak, Statistics Canada said. Analysts in a Reuters poll had forecast a gain of 9.5% in May. 10-year CA10YT=RR was nearly unchanged at 0.537%, while it traded 1.7 basis points further below the U.S. 10-year yield for a spread of 9.5 basis points.